Imperial Tobacco, Europe’s giant cigarette manufacturer, revealed the first fall in profits since it listed on the stock market 17 years ago as a result of challenging circumstances in Europe. Adjusted operating revenue dropped 6.5 % to 1.43 billion pounds within six months, Bristol, England-based Imperial Tobacco mentioned currently in a report.
Per-share profits increase for the whole year is anticipated to be lower of around 4 % to 8 %, the manufacturer of Davidoff and West cigarettes announced in the report. Business environments were “tough” in the European Union, especially in Spain, France and Germany, where economic challenges are “more evident,” it mentioned. Chief Executive Officer Alison Cooper agreed that the company will “reinforce delivery in the 2Q and also in 2014.”
Europe’s economic decline has also affected volumes at bigger competitors such as British American Tobacco (BAT) and Philip Morris International. Imperial, which flagged a possible decrease in first-half revenue in January, is dealing with a risk to its business from the potential plain-packaging requirement in the UK, where it is the main leader with around 45 % of the tobacco market. A modification to UK law on packaging may be unveiled in the Queen’s speech.
Imperial Tobacco increased 0.2 % to 2,303 pence in London trading. For instance, in Australia, which launched plain packaging, there has been no impact on the tobacco use,” Cooper stated, and “I don’t find any problem from being market leader” in the UK
Imperial intends to lower costs in order to make savings of around 300 million pounds per year by 2018, including 30 million pounds in the 2Q of this year to raise profits, Cooper explained.
Imperial Tobacco is following its competitors as BAT and Philip Morris International in elaborating the popular new-generation products, which the firms state are less hazardous since they provide nicotine without having to burn tobacco.
BAT projects to sell its first this sort of product, which is not an electronic cigarette, in the coming year, whilst PMI is planning for the 2017. Imperial has a division known as Fontem Ventures that is “considering new consumer experiences which are closest to tobacco, but not really tobacco,” Cooper stated. “It’s too promptly to expose any details,” she said.
Imperial’s shortage of a pipeline “is an origin of disappointment for many investors,” Bloomquist mentioned.
The amount of cigarette equivalent volumes sold by Imperial Tobacco in the 1Q dropped by 5.9 %. Cigarette manufacturers are counting on larger prices along with growth in growing markets to compensate decreasing usage and increasing government levies in Western Europe and North America.